INSTITUTIONAL SELF-REGULATION (COMPLIANCE)

The duty of financial institutions to self-regulate their compliance with the law was triggered by relatively recent developments. Financial institutions (banks, mutual funds, securities exchanges and advisers) have grown larger and were operating internationally. Government and outside regulators could not effectively supervise and prevent institutional violations. The failures and violations of such institutions were costly to the country, to their employees and to their investors. The failures prompted legislators and regulators to require these institutions to self-regulate and self-police to prevent violation of the law.

The Law of Institutional Self-Regulation (Compliance) is addressed to law students and practitioners. It aims at understanding and managing a system of self-regulation by financial institutions by a dual system of both law and culture. To be sure, the law requires institutions to self-regulate. But rules of law are not enough. In fact, the main mechanism for self-regulation is institutional culture. Like law, culture is a system of rules and their enforcement. Unlike the law, culture rules are established and enforced by institutions, internally. Thus, both law and culture aim at ensuring institutional compliance with the law.

This book notes the differences between the Law Officers and Compliance Officers, the evolving recognition of compliance as a profession, and the rise of compliance officers’ independence. The book offers principles, approaches, and techniques, aimed at detecting and preventing institutions’ legal violations such as, monitoring and investigations, employees' self-examination and rewarding employees for ensuring and supporting compliance with the law. To be sure, each institution, has its “parents,” history, business, powers and weaknesses, aspirations and competitors. This is why institutional self-regulation cannot be uniform and its culture must be adjusted to the law in its own special way—to reach the same application of the law to all.

Professor Tamar Frankelwrites and teaches in the areas of fiduciary law, corporate governance, mutual funds and the regulation of the financial system. She has published 11 books and more than 80 articles and book chapters. In 2018 Professor Frankel received the Ruth Bader Ginsburg award from the Association of American Law Schools. In 2013, the Institute for Fiduciary Standard established the annual Frankel Fiduciary Prize in her honor to award individuals who advance fiduciary principles. WealthManagerWeb has named her among the 50 Top Women in Wealth Management. In addition, she was noted as one of the most well-known 500 lawyers on Lawdragon, and as one of the Women Trailblazers in the Law by the ABA Commission project on Women in the Profession. In 1998, Professor Frankel was instrumental in establishing and designing the corporate structure of the Internet Corporation for Names and Numbers (ICANN).

A long-time member of the Boston University School of Law faculty, Professor Frankel was a visiting scholar at the Securities and Exchange Commission (1995–1997) and at the Brookings Institution (1987). She has taught and lectured at Oxford University, Tokyo University, Harvard Law School, and Harvard Business School. She consulted with the People’s Bank of China and lectured in Canada, India, Malaysia, and Switzerland. A native of Israel, Professor Frankel served as an attorney in the legal department of the Israeli Air Force, an assistant attorney general for Israel’s Ministry of Justice and the legal advisor of the State of Israel Bonds Organization in Europe. She has been in private practice in Israel, Boston, and Washington, DC and is a member of the Massachusetts Bar, the American Law Institute, and The American Bar Foundation.